So you want to buy a home.  The financial part can be overwhelming.  In fact, the planning for the purchase may need to happen years before you step over the threshold of your first Open House.  And saving that down payment is crucial.

Saving that Down Payment

But where do you start?

This may be the toughest part:  You need to spend less than you make.  One of the best motivators to limit discretionary spending can be the drive for home ownership.  There’s a target date and there’s a target amount.  Suddenly, water is being ordered in restaurants, weekend jaunts are cancelled, and friends who like to say “let’s go shopping” are being ignored.

There’s nothing wrong with what some call this short-term ‘sprint technique’ to saving.  Building a budget around the word ‘No’ is manageable for some.  For most people though, a longer term approach to successfully live below your means is recommended – and that’s about recognizing how your day-to-day spending may be preventing your longer term goals (like home ownership) from being realized.

Those who want to take control of their spending should consider tracking every penny – in and out – just to know where it’s all going.  You’re guaranteed to find some leaky categories, and it will help you create a realistic budget.  Make sure you allow for some Fun Money in your budget though, so you don’t feel like your life is on hold even while you are saving.

Setting up an automatic savings plan is another great way to save towards your down payment.  You won’t miss what you never see, so moving money automatically from your chequing account to your savings account every pay-day is a strategy that works.

If you have money saved in an RRSP look into the RRSP Home Buyers’ Plan.  You can withdraw up to $25,000 per person without penalty and pay it back over the coming 15 years.

Don’t be tempted to invest your down payment in mutual funds, stocks or bonds that all go up and down in value.  If your timeline is less than 5 years away, tuck your savings into a regular Tax Free Saving Account.  You don’t want to risk saved capital by having to cash-out investments during a market downturn.

Finally, make sure you funnel unexpected government cheques or refunds, birthday gifts, anniversary gifts, etc. to your down payment fund.  Every little bit helps!

Taking control of your spending today will not only help you save for your down payment.  It will set you on a path towards financial freedom.  And when should you start?  The best time to plant an oak tree is 50 years ago.  The second best time is today.

The above editorial was written by Trevor Van Nest, owner/founder of York Region Money Coaches, and published in the real estate section of October’s Newmarket’s SNAP newspaper.  To assist with any financial question or challenge, please call Trevor at 905-252-4180 to schedule a no-fee/no-obligation consultation.